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Reasons to Retain FTI Consulting (FCN) in Your Portfolio

Zacks Equity Research
·3 min read

FTI Consulting, Inc.’s FCN shares have gained 21.1% over the past year, significantly outperforming the 11.3% growth of the industry it belongs to.

With revenues expected to register 2.1% and 7.3% growth in 2020 and 2021 respectively, we believe investors should hold on to the stock.

Factors That Bode Well

FTI Consulting’s potential to club diverse issues like damage assessment, accounting, economics, statistics, finance and industry under a single platform looks impressive.

The company focuses on business-transformation services, transaction-advisory business, restructuring, retail, construction, data and analytics, cyber business, information governance, and international arbitration. This makes it an excellent partner for global clients dealing with international arbitration issues, thereby generating continued revenue growth from existing international operations.

Increased regulatory scrutiny and a proliferation of corporate litigation sustain the demand for FTI Consulting’s products.

Structural change has become a necessity in the rapidly evolving global markets as management teams look to fend off rivals, protect intellectual property rights and transform businesses via M&A, divestiture and other restructuring activities. These developments call for FTI Consulting’s specialized skill sets, which in turn drive the top line.

Some Risks

FTI Consulting’s debt level has increased significantly quarter over quarter. Total debt at the end of first-quarter 2020 was $492 million, up from the $452 million recorded at the end of the prior quarter. The total debt to total capital ratio of 0.25 was higher than the previous quarter’s 0.23. An increasing debt-to-capitalization ratio indicates that the proportion of debt to finance the company’s assets is on the rise, and so is the risk of insolvency.

Further, cash and cash equivalent balance of $223 million at the end of the first quarter was well below the debt level, underscoring that the company doesn’t have enough cash to meet its debt burden.

Zacks Rank and Stocks to Consider

FTI Consulting currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are DocuSign DOCU, SailPoint Technologies SAIL and Republic Services RSG. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected earnings per share (three to five years) growth rate for DocuSign, SailPoint and Republic Services is 31.2%, 15% and 6.6%, respectively.

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FTI Consulting, Inc. (FCN) : Free Stock Analysis Report
 
Republic Services, Inc. (RSG) : Free Stock Analysis Report
 
SailPoint Technologies Holdings, Inc. (SAIL) : Free Stock Analysis Report
 
DocuSign Inc. (DOCU) : Free Stock Analysis Report
 
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Zacks Investment Research